Tory donor David Ross's property company Kandahar still in breach of debt covenants

David Ross's private property company remains in breach of its debt covenants
despite a recovery in property values, new accounts have revealed.

David Ross, a Conservative party donor, pictured with Prime Minister David Cameron and his wife Samantha.

By Graham Ruddick

6:00AM BST 06 Oct 2010

The 2009 figures for the embattled Kandahar Group, the main UK property vehicle of the Carphone Warehouse co-founder and Conservative party donor, shows its property rose in value by 4pc to £192m last year, despite the recession causing rental income to fall 8pc.

However, the pick-up in values – which follows a dramatic tumble in 2008 as the commercial property market collapsed – could only improve the group's loan to value ratio on its £247m debt facility from 134pc to 127pc, still above the covenant of 82.5pc.

In the accounts, published yesterday, Kandahar said it was still breaching covenants on June 30, 2010, but is "hopeful" of reaching a restructuring agreement by the end of the year and that Mr Ross is continuing to meet interest payments.

It also says that its bank HBOS, which is owned by Lloyds, has confirmed it will "continue to provide sufficient financial support" to the group during negotiations and that it is "not in the interest" of the bank to place Kandahar into an insolvency process.

Last month, it was revealed that Mr Ross was preparing to break-up his Kandahar empire and had brought in Jones Lang LaSalle, the property agent, to advise on strategic options.

Mr Ross could choose to pursue a £230m sale of his biggest asset Drake Circus, the Plymouth shopping centre which is held in a different Kandahar vehicle to the primary UK one, or the complete disposal of his Kandahar empire, which could raise over £400m.

Despite the Kandahar Group accounts containing a "going concern" warning due to the covenant breach, the directors said the portfolio had performed "in line with expectations".

Mr Ross, a friend of the Prime Minister, resigned from the board of Carphone Warehouse in 2008 after it emerged he had pledged around £200m of shares as collateral for a loan.